Merger Control Practical Aspects

Transcription

1 Merger Control Practical Aspects for British Law Centre Małgorzata Mroczkowska-Horne Partner Pawłowski, Żelaźnicki sp.k

2 Contents Mergers Legal framework What is a merger? Substantive Assessment When? What? Notification procedures Poland and EU Sanctions for failing to notify Enforcement of Competition Law UOKiK activities Merger Control Practical Aspects - for British Law Centre 2

3 What is a merger? Merger = concentration Concentration may be in the form of - Acquisition of control (sole, joint, de facto) - Merger - Acquisition of assets Full function joint venture - Full-function joint venture, i.e. JV that performs on a lasting basis all functions of an autonomous economic entity - No concept of full-function joint venture in Poland Merger Control Practical Aspects - for British Law Centre 3

4 Merger Control Regulation No. 139/2004 the so-called EC Merger Regulation ( EC Merger Regulation or ECMR ) Implementing Regulation The Polish Act on Competition and Consumer Protection of 16 February 2007 (the Polish Competition Act ), as amended Merger Control Practical Aspects - for British Law Centre 4

5 Legal Framework EC Merger Regulation and the Implementing Regulation EC Merger Regulation contains the main rules for the assessment of concentrations The Implementing Regulation concerns procedural issues National competition laws In Poland the Polish Competition Act and auxiliary acts and ordinances Best Practice Guidelines The relationship between case team and parties/third parties during the procedure (pre-notification contacts, meetings, provision of documents). Merger Control Practical Aspects - for British Law Centre 5

6 Legal Framework con. Notices and Guidelines Consolidated Jurisdictional Notice Simplified procedure Case referrals Notices on substance - Non-horizontal Guidelines - Horizontal Guidelines - Relevant Market - Remedies - Ancillary restraints The role of the Hearing Officer Access to file Abandonment of concentrations Merger Control Practical Aspects - for British Law Centre 6

7 Substantive assessment Relevant market Legal framework What is a merger? Market shares Efficiencies Market power Merger Control Practical Aspects - for British Law Centre 7

8 Market definition and market shares Commission looks at market shares in the relevant market(s) In many decisions the Commission does not take a firm view on market definition However, in some cases the Commission may agree that there is no need for a market definition, if sufficiently argued And there is no doctrine of precedent Generally, in a difficult case, Commission s instinct is to go for the narrowest definition of the relevant market that has some support from the industry (competitors, customers) Merger Control Practical Aspects - for British Law Centre 8

9 Substance Situations when there may be problems The following raise warning bells, particularly for the EC Combined market shares over 40% in the narrowest market High market shares in one country Concentrated industry (5 players or less) Hostile competitors and/or customers Competitor wants part of merged business Commission is investigating the same sector In such cases, antitrust issues should be examined as early as possible Merger Control Practical Aspects - for British Law Centre 9

10 Horizontal mergers May establish, enhance or entrench dominance Single firm dominance 40% market share or less little risk 40% to 50% market share some risk of prohibition/remedies 50% to 70% market share real risk of prohibition/remedies 75% plus market share likelihood of prohibition/remedies Collective dominance Requirements: - Market transparency - Cooperation sustainable Merger Control Practical Aspects - for British Law Centre 10

11 Procedure Compulsory notification if turnover thresholds are met Rule 3+ Implementation prohibited until clearance (so called gun jumping = implementation before clearance) Strict time limits for Commission s review (UOKiK - recently changed) Assessment Distinguish between: - Horizontal mergers (parties competitors) may establish, enhance or entrench dominance - Vertical mergers (parties not competitors) may entrench existing dominance - Conglomerate mergers Merger Control Practical Aspects - for British Law Centre 11

12 When do we notify the transaction to Antimonopoly Authorities? Poland/EU! Intention to concentrate notification to be filed before closing? What is accepted as a demonstration of intention to notify? Preliminary Agreement Letter of Intent Conditional Share Purchase Agreement In case of tender, often more than one consent may be granted by the Authority Merger Control Practical Aspects - for British Law Centre 12

13 What is subject to notification? Poland/EU Merger of two or more independent entities Acquisition of control (direct or indirect) Joint venture EU only full-function joint venture, i.e. a JV which acts continuously as independent economic entity Poland any joint venture Acquisition of assets (not at the EU level) Merger Control Practical Aspects - for British Law Centre 13

14 What does not require antimonopoly consent? Poland Temporary purchase of shares by financial institutions with a view to sell them Acquisition of shares in an entity whose turnover in Poland in either of 2 financial years proceeding the notification did not exceed EUR 10 million Joint venture if the turnover in Poland of each of the parties to the JV did not exceed EUR 10 million in either of 2 financial years preceding the year of the notification Temporary acquisition of shares as security Concentration taking place as a result of bankruptcy proceedings (except for acquisition by competitors) Concentration of entities within the same capital group Merger Control Practical Aspects - for British Law Centre 14

15 What does not require antimonopoly consent? EU Bankruptcy proceedings Acquisition of control by financial holdings Only in order to protect the investment Merger Control Practical Aspects - for British Law Centre 15

16 Turnover thresholds Poland Aggregate worldwide turnover of parties in a year preceding the concentration exceeds EUR 1,000 million, or Aggregate turnover generated by the parties in Poland exceeds EUR 50 million, and In an asset deal, turnover generated by the assets in question in any of the two years preceding concentration exceeds EUR 10 million In a joint venture, turnover generated in Poland by parties to the joint venture in any of the two years preceding concentration exceeds EUR 10 million Merger Control Practical Aspects - for British Law Centre 16

17 Primary thresholds EU The combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5,000 million; and The aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 250 million Unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State Merger Control Practical Aspects - for British Law Centre 17

18 Secondary thresholds EU The combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2,500 million In each of at least three Member States the combined aggregate turnover of all the undertakings concerned is more than EUR 100 million In each of at least three Member States included for the purpose of point (b) the aggregate turnover of at least two of the undertakings concerned is more than EUR 25 million, and The aggregate Community-wide turnover of each of at least two of the undertakings concerned is more that EUR 100 million Unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State Merger Control Practical Aspects - for British Law Centre 18

19 Notification procedures before the Commission and the National Competition Authority ( the NCA ) Detailed notification needed the Commission s Form CO or the Relevant NCA s Merger Notice locally Possible contacts on the form and substance with the Commission before signing Aim is to take issues off the table, to reduce information required in the filing and to avoid an in-depth investigation Discuss relevant markets: consider early input from the economists Can drag on for complex cases, which may interfere with timing No consultation procedure as a part of proceedings with the NCAs in some countries, e.g. Poland Merger Control Practical Aspects - for British Law Centre 19

20 EU Procedure (I) Phase 1, Phase 2 Phase I After a complete notification has been submitted, the Commission has 25 working days in which to assess the transaction This period may be extended to 35 working days if the notifying party offers remedies within 20 working days after notification Merger Control Practical Aspects - for British Law Centre 90 working days in total Phase II + 20 working days if requested by parties (or Commission with parties consent) + 15 working days if remedies offered after 54th day of investigation The process includes the following steps: 1. Statement of Objections (SO); 2. Oral hearing 3. Political stage with Advisory Committee and 4. Final Decision 20

21 Final Point on Notification Pressure points for the Commission Case Team makes assessments on basis of information obtained from Notification Form: (detailed market data, often on a country-by-country basis) Questionnaires sent to competitors + customers (several in a complex case) Complaints (given great weight, especially if from customers) Press (e.g. CEOs speaking about the deal) General views of the Company and the sector Investment bank and other reports to the acquiring company s board Other competition authorities precedents Merger Control Practical Aspects - for British Law Centre 21

22 National level filing: Poland (I) Mandatory for acquiring entity or, in case of merger, jointly on behalf of all parties Urząd Ochrony Konkurencji i Konsumentów (the Antimonopoly Authority or UOKiK ) has jurisdiction when the following thresholds are met: The parties aggregate worldwide turnover in the year preceding the notification exceeds EUR 1,000 million OR The parties aggregate Polish turnover in the year preceding the notification exceeds EUR 50 million AND (only applicable in case of takeover of control) The target s Polish turnover thresholds during at least one of the two years preceding the notification exceeds EUR 10 million OR (only applicable in case of asset deals) The turnover generated in Poland by the assets to be purchased during at least one of the two years preceding the notification exceeds 10 million OR (only applicable in case of joint ventures) The turnover generated in Poland by the parties to the joint venture in at least one of the two years preceding the notification exceeds 10 million NB: There are detailed principles of calculating the turnover. The target s turnover only includes the turnover of the target and its subsidiaries Merger Control Practical Aspects - for British Law Centre 22

23 National filing: Poland (II) No deadline to file (However, the subject of notification is the intention of concentration) Suspension of the transaction until clearance Currently clearance timeframe: Implementation is suspended pending the decision of the authorities, which have 1 month to issue a Phase 1 decision or to conduct an investigation in Phase 2 which can take up to additional 4 months The review period is also suspended in case the Antimonopoly Authority asks additional questions Therefore, in case the Antimonopoly Authority starts market investigation, the procedure might take even half a year. There is no official term for conducting the market investigation, thus the Antimonopoly Authority may use the suspension to prolong the deadline and to ask additional question while investigating the market Merger Control Practical Aspects - for British Law Centre 23

24 Appeals Possible to appeal against a negative (or positive) decision: To the Court of First Instance in Luxembourg (Commission decisions) or National Antimonopoly Court Procedural rules in the EU enable quick decisions in such cases National Appeal Courts may not be very swift Merger Control Practical Aspects - for British Law Centre 24

25 Phase II investigations and prohibitions EU level Out of 6,747* cases notified since September 21, 1990 till October 31, 2017, the Commission opened Phase 2 investigations in only 251 cases (<5%) and prohibited only 27 transactions In 2016, the Commission opened 8 Phase II investigations in 8 cases out of 362 notified transactions (2,2%) Polish level In 2016**, UOKiK opened Phase II investigations in only 10 cases out of 196 notified transactions (<5%) Other types of decisions: Remedies Compatible Compatible with commitments Prohibitions Out of scope *Source: **Source: Merger Control Practical Aspects - for British Law Centre 25

26 Sanctions for failing to notify Poland Concentration which was not cleared by the Antimonopoly Authorities is valid but Within 5 years from the date of concentration the President of UOKiK may order a division of a joint venture, sale of its property or shares Financial penalty for the parties up to 10% of the annual turnover Financial penalty for management members: Up to 50 times of an average salary or For people in managerial positions up to 2 million PLN Merger Control Practical Aspects - for British Law Centre 26

27 Sanctions con. EU Validity depends on subsequent decision of the Commission: An approval validates the concentration, a prohibition makes it invalid Financial Penalty up to 10% aggregate turnover of the parties Merger Control Practical Aspects - for British Law Centre 27

28 Enforcement in the EU/EEA EC competition law applies in 28 EU Member States and 3 EFTA States National Competition Laws are modeled on EC Competition Law and apply in parallel EC Competition Law is enforced by The European Commission The European Courts (since 2004) National Competitions Authorities (since 2004) National competition law is enforced by National Competition Authorities National Courts Merger Control Practical Aspects - for British Law Centre 28

29 Enforcement of antitrust law in Poland 2014 Adam Jasser appointed as the President of UOKiK, continued strategy of the Office as far as: UOKiK s priority: to increase the discovery of anticompetitive behaviour in the market and its prosecution both country-wide and in local markets Improvement of merger control system Quality of proof in antimonopoly proceedings Increase of functionality and transparency of procedures in proceedings before the UOKIK 2016 Marek Niechciał as the current President of UOKIK Merger Control Practical Aspects - for British Law Centre 29

30 Summary - UOKiK Activities Further development of the leniency program stronger incentives to cooperate January 1, 2009 Guidelines for fixing fines February 24, 2009 Ordinance of the Council of Ministers and UOKiK leniency guidelines (the Leniency Program) 2015 Guidelines on notification of concentrations Increasing transparency and efficiency of proceedings before UOKiK January 2015 modernization of the Polish merger control procedure Increase of consumers protection in dealings with entrepreneurs Merger Control Practical Aspects - for British Law Centre 30

31 Thank you for your attention Małgorzata Mroczkowska-Horne Partner, Radca Prawny Tel: (+48) PwC Polska Sp. z o.o.